MICHELLE SINGLETARY: Elizabeth Warren's Mission

When Yahoo put out its top 10 searches in the financial category for 2010, there was no surprise to find, among the leaders, unemployment, foreclosures and the Dow Jones flash crash, the term coined for when the Dow dropped more than 600 points in one day last May.

At No. 7 on the Yahoo list, behind the Tea Party movement, was Elizabeth Warren.

What makes Warren stand out is her assignment to set up the new Consumer Financial Protection Bureau. If I know Warren, the agency will fundamentally change a financial industry that has long taken advantage of consumers with only an occasional and not nearly hard enough smack on the knuckles.

Warren, who is serving as assistant to President Obama and a special adviser to the secretary of the Treasury, sat down with me recently in her Treasury office for a one-on-one discussion about the initial plans for the watchdog agency created to protect consumers from the abusive lending practices that contributed to the financial crisis.

“I wouldn’t have guessed in a million years that I would be putting forth this agency working to get it started and setting its first priorities,” said Warren, who has taken a leave from teaching at Harvard Law School.

There has been a lot of opposition to Warren heading or setting up the bureau. Critics argue that the bureau would stymie the creation of new credit products or that Warren would advocate imposing regulations so tough that it would make it more difficult for people to get credit.

But right now Warren says her focus is on helping consumers understand how much they are paying for debt on everything from credit cards to mortgages. At a recent conference held by the Consumer Federation of America, Warren said the bureau’s initial goal isn’t to impose a series of “thou-shalt-not rules.” Instead, she said that first on the agenda is providing consumers with better and shorter credit disclosures. Although this goal may sound so simple, it has the potential to greatly reduce the financial burden for people because they don’t fully comprehend how much their debt is really going to cost them.

“There are a lot of financial institutions that make their money by keeping products confusing so the price isn’t clear until it’s way too late,” Warren told me. “They make money by concealing risk, which means that people can’t compare the products head to head.”

Think about it this way, Warren says. Restaurants would lose customers if they weren’t clear about what a meal cost.

“No restaurant survives by saying, ‘You will find out how much the food costs on the back end after you’ve eaten, after it’s too late to do anything about it,’ ” she said.

Yet that’s exactly what happens to many people in their dealings with financial institutions. The true cost of credit is often hidden in lengthy and incomprehensible legalese documents.

“Making it clear means there will be some families who will know the true cost of these products and say, ‘I don’t want any part of this,’ ” Warren said. “If that had happened 10 years ago, there would be some families who wouldn’t have refinanced their homes straight into foreclosure. There would be some families who didn’t take on credit cards that pushed them straight into bankruptcy. We are not saying you have to put a cap on prices. What we are saying is that you have to make your prices clear.”

I asked Warren whether consumers should be held accountable for their bad decisions in taking on risky mortgages or failing to understand the credit contracts they signed.

Warren moved to the edge of her chair.

“The fact that we are fallible human beings — that we make mistakes, we sometimes get greedy, or we sometimes misjudge — is that an excuse for anybody to cheat us?”

To further make her point, Warren told the story of a 67-year-old widow who hadn’t understood that the mortgage she took out had a two-year teaser rate. The woman’s loan eventually adjusted to a monthly payment she couldn’t afford. She lost her home to foreclosure. The woman had trusted the bank representative who persuaded her to refinance, Warren said.

Warren got choked up recalling the anecdote.

The new watchdog agency has some broad policing powers over consumer financial products and services. But it’s Warren’s history of passionately advocating for consumers that I’d bank on. Under her direction, the bureau can become one of the most powerful agencies in the federal government, unapologetically and aggressively looking out for the welfare of consumers.

Reach Michelle Singletary c/o The Washington Post, 1150 15th St. NW, Washington, D.C. 20071; or at singletarym@washpost.com. Comments and questions are welcome, but due to the volume of mail, personal responses may not be possible. Please also note comments or questions may be used in a future column, with the writer’s name, unless a specific request to do otherwise is indicated.